There has been much talk about the Federal Reserve raising interest rates again. On Monday, Federal Reserve chair Janet Yellen disclosed another factor, beyond the American economy, that could weigh into that decision: the Brexit.
The Brexit, or the possible departure of the United Kingdom from the European Union, would take place through a referendum held on June 23rd. If the majority votes “yes”, many consequences could result in England, ranging from the ousting of Prime Minister David Cameron to new trade deals being negotiated.
It is expected that U.S. markets would be affected, as modern markets are very dependent upon one another. Investors would probably feel less confident investing in general, should there be an upheaval, making the Brexit a major political event.
Even with the Brexit, it would seem as if Yellen is fairly intent on raising rates. She commented that “positive economic forces have outweighed the negative,” hinting that the Fed is going to raise interest rates for the second consecutive time, despite some negative news, such as the recent dismal jobs report.
Other data from May would seem to support the idea that the U.S. economy can handle a rate increase. For example, consumer spending, inflation, and housing prices all showed marked increases.
The Fed will have two chances in the near future to increase interest rates: on the 14th and 15th of June, or in July, after the EU referendum.